This paper investigates the characteristics of firms that adopt persistent policies of low leverage and substantial cash reserves. In doing so, specific attention is paid to the role of internal corporate governance mechanisms in influencing firms' conservative financial policies. The analysis of this paper classifies firms as financially conservative if they adopt both low-leverage and high-cash policies at the same time. Using a large sample of non-financial UK firms over the period 1984-2001, we provide evidence that conservative firms tend to undershoot (overshoot) their target leverage (cash holdings) levels. Our results also suggest that managerial ownership, board composition and, to some extent, ownership concentration are important determinants of the probability of firms adopting conservative financial policies.

If you experience problems downloading a file, check if you have the
proper application to
view it first. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.

References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

When requesting a correction, please mention this item's handle: RePEc:yor:yorken:04/01. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Paul Hodgson)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through
the various RePEc services.